Chamber expects recession bottom in mid-2009
WASHINGTON (Reuters) - The U.S. Chamber of Commerce said on Wednesday that it expects the recession to hit its bottom by the middle of 2009, unless there is another major economic shock.
The influential business lobby also said it expects unemployment to rise during the year, reaching between 8.5 percent and 9.0 percent. The national jobless rate is currently 6.7 percent.
"It's not exactly a breaking news flash to say that the state of American business right now is not very good," said Tom Donohue, president of the chamber during the group's annual State of American Business event.
The chamber urged Congress to quickly pass an economic stimulus package that includes rebate checks for consumers, tax breaks for U.S. companies and a plan to stem the tide of rising home foreclosures.
The stimulus plan is still in a formative stage, but President-elect Barack Obama and his advisers have suggested it will total about $775 billion, spread over two years, with a substantial chunk reserved for tax cuts.
Obama has said that signing a stimulus bill would be a top priority when he takes office on January 20, but it will likely take a few weeks for Congress to agree on the details.
Bruce Josten, executive vice president of government affairs for the chamber, said on Wednesday he was encouraged that Obama seems to be shifting some of the stimulus from spending initiatives to tax cuts.
The president-elect is to deliver a speech on Thursday about the economy and is expected to lay out more details about the plan that he says would save or create 3 million jobs.
Obama and Democrats in Congress are talking about a package that would include funds for the building of roads, bridges and schools as well as money to promote renewable energy projects. It may also include more than $300 billion in tax cuts.
The chamber said it wants the stimulus bill to extend the tax loss carryback period from two years to five years, to temporarily allow foreign subsidiary earnings of U.S. companies to be repatriated at a reduced tax rate.
It also seeks to provide temporary tax relief over one or two years for companies that buy their own debt at a discount.
"We're looking at broad macro things in the tax area that would have the biggest bang for the buck," Josten said.
The chamber also recommended:
* Extending bonus depreciation provisions and adopting a temporary investment tax credit
* Reducing the corporate capital gains tax rate to 15 percent
* Extending the reduced tax rate on dividends and capital gains
* Temporarily reducing borrower and lending fees for small business lending programs
* Adopting broader flexibility in funding methods for pension plans
* Providing funding for near-term infrastructure projects that can be spent quickly
* Repealing the pending 3 percent withholding tax on all government payments, such as Medicare, grants and farm payments
* Establishing a tax credit for the purchase of vacant homes along with a mortgage rate buy-down provision
* Allocating a portion of the remaining money under the $700 billion bailout fund to capitalize a Federal Reserve liquidity facility for new commercial mortgages and unsecured commercial real estate loans
* Modernizing the cancellation of indebtedness rules as applicable to real estate investment
* Providing significant funding to jumpstart state-based broadband initiatives and tax credits to encourage private-sector investment in broadband infrastructure
(Reporting by Karey Wutkowski; Editing by Tom Hals)
